Biz Ladies: Why Cheap Can Be Bad

When it comes to pricing your goods and services, there never seems to be a magic number. We’ve covered the topic quite a lot over the years and today we are adding to the collection with a post from Laura C. George, a business consultant for artists who teaches the ins and outs of building an income around art. She previously wrote about Fast Food Marketing for Your Biz and today she covers the topic of pricing for the right audience. You can catch further pricing strategies in her free The Art of Pricing Art video. Here’s to finding the price that fits! — Stephanie

Read the full post after the jump…

The other day, I bought a nice-looking settee I found on Craigslist – for $200. It’s upholstered in a pretty, neutral linen and has simple curved lines. Not a stand-out piece. Certainly not an impeccably-made or incredibly oh-my-word-comfortable piece. But it’s nice and I didn’t want a big couch or even a loveseat in the space.

How I Found Out I “Paid Too Much”
A friend of mine came over and commented on the new piece of furniture. So I told her how I had scoured Craigslist and yada yada – my husband interrupts, “Well, I think she paid a little too much.”

When I announced that it was “only $200”, my friend’s eyes widened and she informed me that the going rate for a piece of that size and quality if more like $50, at least in our area.

At first, I was a little embarrassed. Perhaps I had paid too much. Why didn’t I think to haggle? Should I have waited for a different piece?

But the more I thought about it, the more I realized that I didn’t pay too much.

I Wanted To Pay $200
I passed up plenty of similar pieces on Craigslist that cost less. Primarily because I didn’t like them as much. Most of them had a fatal flaw – perhaps the color or fabric, or maybe the height or length. And this was the first one I saw that I really liked.

But the other, more important reason I didn’t pay too much is that I wanted to pay $200 for the piece.

It wasn’t that I had that particular number in my head before I went Craigslist shopping, but that I no longer buy cheap furniture if I can avoid it – a personal preference stemming from excessive particle board furniture when I graduated college. Now, I like being the type of person who buys decent furniture. It’s an identity issue.

How Identity Affects Your Prices
Your customers also have identities – both of who they actually are and of who they want to be. If you’re reading Biz Ladies, you’re more likely to have nicer products that attract people with more money. And people with more money have different perspectives of what is expensive, yes, but they also want to be the type of people who buy nice things. This is a large generalization, not something you can apply to each individual person, but the majority of people who are attracted to nicer products and services are also people who want to confirm their identity of being people with good taste.

I work with artists, so it’s easiest for me to explain how this works in the art world, though it can be applied to every industry. Your customers want to be the type of people who know what is “good” art. When this is a realistic identity, they’ll already know they want your art (because you make incredible art!). And if this is an imagined identity, they’re going to use vanity evidence to determine what “good” art is, so that they can still be the type of people who buy “good” art.

That means they’ll use things like your selling location (Etsy, eBay, and your own website are all going to feel different to them), the way you write or speak about your work (including innocent typos), and most often – how much you charge.

If you have inexpensive products and services, your customer is going to run away because they don’t want to buy cheap. They want to buy products and services that make them feel like that person they want to be – the one with impeccable taste and the one who only invests when it’s worth it. A higher price indicates a higher worth.

Of course, not all your customers will be like that. But the more you cater to the ones who are, the more high-priced sales you’re going to make. And that’s a win-win. Great products and services in the hands of people who love them and are incredibly happy to pay you for them; and money in your pocket for something you poured your soul into.

The Ethics
This is right around the time when I imagine you’re thinking, “I don’t want to manipulate my customers.” But people aren’t stupid. They don’t buy just because they think something’s good. They also have to like it, maybe even love it. Just how I mentioned that I didn’t like the less-expensive furniture as much as the settee I ended up buying, your customers will like what you do and make more than the other stuff out there or they won’t buy it no matter what you charge.

What Next?
Here’s how you can prove to yourself that this works. Ask a friend who has bought something in your industry in the past if she thinks a certain piece of yours should be $50 or $200 (or pick numbers that make more sense for your products and services of course). A client of mine did this experiment the other day and was shocked to find the friend saying that if it’s priced low she’d assume it was poor quality and wouldn’t want to buy it.

Do the exercise yourself to confirm. And then go back through and reprice everything. If you like, you can use my favorite pricing strategy for artists and creatives that I outline in detail over here. Try to play into the identity your customers align with. Who do they want to be and how can you help them feel like that?

This is spot-on in terms of what I am finding when pricing my home staging services. People don’t want to spend TOO much but they also don’t want to be perceived as “cheap”. Thanks for confirming my own theories!

I’m a graphic designer, and I struggle to find the right price to charge. In the end, I have decided to charge based on the client, what they require, and how I feel about the job. I have no set amount because some big companies are used to paying a lot for design work, and under charging them doesn’t work well for me or the relationship.

Great post. I always feel I need to apologise for my tea towels not being cheaper, but the fact is there is nothing quite like them out there (which is why I made them in the first place) and this is just what they cost (Eur12). There are many people, including me, who consider that an okay price to pay for something that is just what you’re looking for and I think that’s true of a lot of things.

Design-minded people in particular (like, for example, the average Design*Sponge reader) have an eye for detail and so as much as we like a bargain piece of second-hand furniture we also like things that happen to be expensive. So if that new small vase cost ten times as much as the thrifted chest of drawers it rests on then so be it – they are both beautiful and a pleasure to behold (especially together) and that’s what counts.

This is great! One thing I always remind people who are charging really low is that someone will always want to pay less but someone will always (well, almost always, at least!) be willing to pay more. Thanks for the insight into pricing :)

This works for most products and services. When I was a programmer I got my share of lowball offers. “But I found someone that can do this work for half the price.” My answer was always: “Go with them, if you want, but I am the one who knows what it costs to do what you need. If the work is not to your liking and later you want me to fix it, it will cost you more.” I usually got the job. A little assertiveness goes a long way, the catch is then you have to deliver.

On arts – and crafts – what I see a lot is people trying to breach the market by selling in a price that does not cover costs and labor. This harms not only them, but the market. Pricing in a way that will keep you working is just common sense. As I said… a little assertiveness goes a long way.

Sonia, building the audience does take time, but figuring out who they are is the first step! Decide what market your targeting and use that to inform your branding, pricing, copy, and marketing efforts. Then they’ll come to you pretty easily, instead of you feeling like you’re struggling to slowly build the audience one-by-one-by-one.

Tash, I think that’s a decent strategy. If you don’t feel good about the price because the client or the work is different, resentment will grow and the project will go south. Flexible pricing works really well in graphic design too, where every project is completely different. You can more easily justify the changing prices than some other industries.

Right on, Tea Towel Dame! I totally agree. It doesn’t matter that some people complain about your prices. I don’t think I’ve met a business owner who doesn’t have SOME people complain about their prices. The goal is that YOUR people don’t. The people who you’re targeting. The people who you want to buy from you – they have to feel comfortable with the prices. And you can pick any sort of person you want for a target market. It’s up to you.

Leticia, I love the way you dealt with people trying to get the lower price. My parents own a UPS Store and they’ve always done that too. “Well, I can go to the post office and get it cheaper.” And they just tell them to go – those people who do leave aren’t the right market. But a lot of people will stay because my parents make it easier, less stressful, and leave people more confident their package will arrive safely. Great lesson for the rest of us, right? “A little assertiveness goes a long way.” So true.

I could write a whole blog post on undercutting the market. A lot of people in the handmade world are doing it as a hobby and they don’t track their costs, so they have no idea how cheap they are selling their products for, hurting a lot of people trying to run legitimate businesses.

Hey Laura, nice post. It’s very relevant to me at the moment too, because a client recently balked at how low my prices were. So I upped them :)
Also, I find that when I charge what I’m really worth, I’m more than likely to do an A+ job because I’m thinking “Holy S&%^! This person paid me so much money! MUST BE PERFECT!”
x

Thanks I really needed this! I am an interior designer, and I have definitely struggled with how to price my services. I grew up in the sort of family that would never dream of hiring a designer, so it’s hard for me to put myself in the mindset of my clients and know what they are willing to pay.

Thanks for sharing your experience and thoughts of wisdom in this area I really appreciate it, I need to know all that I can from women in the field so that I know how to approach things in a specific manner. Aloha once again.

This is great, but I don’t think you have to spend more to consider yourself as someone with good taste. Taste doesn’t = money. There are so many factors that go into peoples buying decisions such as ‘can they afford it’ and if they can’t, that doesn’t mean they don’t have good taste. I have a business, I know what it costs to make my product- but I’m also a smart spender and don’t live beyond my means and to me thats more important, but it doesn’t mean that because I paid less that I don’t have good style, taste, worth.. etc.

The post isn’t saying that having money = good taste. What she is explaining is the fact that SOME people with people feel that owning expensive things DOES equal taste. You don’t have to agree with their assumption (which I don’t agree with either), but the fact is that a percentage of the buying audience does feel that if they buy expensive things, that will show other people that they have good taste. The post wasn’t trying to prove or disprove the expensive = taste equation, but rather point out that percentage of the buying demographic to prove that there are definitely people out there who will see your higher price tag as a GOOD thing and not a bad thing.

“You are not your client.” I don’t know who said it first but they deserve a gold medal, Ms. Weatherbee. We all come with our own money issues and work issues. In order to run a successful business we have to set that stuff aside and focus on what’s real.

Thanks for clarifying for me, Grace. It’s hard to describe that nuance. Dawn, I totally agree with you. Sometimes inexpensive things are just prettier or hit your soul more deeply than their expensive counterparts. Or they have some quality about them that makes them a better fit for what you’re trying to accomplish. I think we all shop at Target and Walmart sometimes, even if some also shop at more expensive stores. But as Grace said, that doesn’t mean that some people don’t feel better about their more expensive purchases and feel like those purchases define them more. Like I was saying to Mrs. Weatherbee, we all have our money issues!

Great story! I actually clicked away for a while to find a couch to renovate… back now!

One of the biggest mistakes I see women make is ask other people “How much would you pay for this?”

Most of our pricing decisions are totally irrational. Who knew twenty years ago that we’d pay so much for a fancy latte?

Too cheap can attract clients who are constant bargain hunters AND can turn off potentially great clients.

I once really reconsidered working with a photographer who was otherwise awesome because her prices were too cheap and I couldn’t figure out why. I made a decision about her ability based on her cheap prices.

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